Since restructuring balance sheets post the late-1990s crisis, Asian companies have enjoyed an uninterrupted build-up of cash reserves and a corresponding reduction in debt levels. According to ABN Amro, in 1998, the nadir of the crisis, average net debt to equity was 60.5%. That ratio has fallen dramatically to around 25% now and will drop below 20% in 2006.
The lack of gearing is now suppressing returns on equity of Asian companies, says ABN Amro, an important factor in valuation.
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